Think ESG Data Has No Value? Think Again

Think ESG Data Has No Value? Think Again

In 2019, Australian airline giant Qantas announced that it will go carbon-free by 2050. In other words, by 2050, Qantas will reduce the carbon emissions it produces to zero. In fact, they plan to immediately act upon their goal, claiming to work on alternate, renewable sources of fuel in the next decade.   

Ordinarily, investors would have been skeptical of Qantass new goal: renewable energy is often more expensive and can even be less efficient. But in 2019, the opposite happened: Qantass share price shot up moments after the announcement.   

That is the power of ESG data today.   

What is ESG? 

Before we get into why ESG data and ESG consulting are so valuable today, let us first quickly understand what ESG data is.   

ESG data is the collated data that reflects the Environmental, Social and Governmental policies of an organization.   

The data is usually translated into an ESG score, which, if high, tells us that the organization operates on policies that favor environmental, social, and governance policies of its region.   

  • Environmental: These policies are related to the organizations contribution to combating climate change, by using green materials or green fuel, for example.   

  • Social: These policies are related to the organizations commitment to making a social impact, by not violating human rights or abiding by labor laws, for example.  

  • Governmental: And finally, these policies ensure that the organization strictly abides by the regulations laid down by the government, such as EU's climate benchmark regulations, for example. 

Okay, so a high ESG score simply tells us that the organization cares, that it does not intend to succeed at the expense of other people, or the planet, for that matter.   

In fact, Qantass example has also led other organizations to take ESG data seriously: more and more of them now employ ESG advisory services. 

But why is it so important suddenly? 

The importance of ESG data and ESG consulting 

Today, more and more studies are instead finding positive correlations between high revenue and a high ESG score.   

Climate change, for example, seems to be the top priority for investors, as illustrated by the Qantas case. It seems that people in the present times care, really. With umpteen digital avenues to consume and share information, people can easily learn how an organizations policies affect them or others. This could result in protests, bad PR, and public backlash, in general.   

Whether an organizations concern is genuine or whether it is pandering to its investors, there is a clear tendency to show that they are on team Change — whether it is changing for the good of the environment, the people — their people, their stakeholders, or the government.   

Naturally, ESG data now highly influences investment strategies across the globe. 

Forgoing ESG data is no longer an option. Portfolios are, and ought to be, dominated by ESG high scores, to ensure which organizations rely on sustainability consulting firms that champion sustainability consulting services.   

Whatever the intention — genuine or not — whatever the source of the data — social media, activism, or climate science research — ESG consulting is here to stay. And that is good for us. All of us. 

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